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Raoul Pal, Paying Attention

March 29, 2017

When my friend Raoul Pal – mastermind of Global Macro Investor and partners with Grant Williams in Real Vision TV – has something to say, my ears perk up. And when he leads off a piece this way, I am ALL ears:

I’m going to blow your mind with this following article. My mind is still reeling from my discovery and from writing this piece.

Turns out he’s talking about India, and more specifically, about recent advances in that nation’s technological infrastructure.

(I)t is very rare indeed that a country develops an outsized technological infrastructure breakthrough that leaves the rest of the world far behind.

But exactly this has just happened in India... and no one noticed.

And Raoul wastes no time in telling us the implications of this development:

India is now the most attractive major investment opportunity in the world.

That’s quite a statement. So rather than tease his insight, I’ll just let Raoul make his case.

It is this sort of “How did you find that?” idea that Raoul is known for. He writes one of the most expensive macroeconomic letters in the world, and his subscriber list is short and extremely exclusive.

I first met Raoul maybe seven years ago in a small private hedge fund gathering to which he gave a presentation. We stayed in contact and begin to find ourselves together at various events, often ending up on panels and stages together. Raoul has become a good friend. Shane and I have been lucky enough to stay with him at his home on Little Cayman Island (total population 100 residents, with one bar and a few small hotels that cater to the serious scuba diving community. It is the ultimate libertarian paradise – no government! When something has to happen in the community, they simply get together at the bar, decide who’s going to pay for what, and get on with it.

Raul comes up with more unique ideas per year than any man I know. What’s fascinating is that he comes up with an idea and then you begin to see it filtering into the trading/hedge fund community.

This year at the Strategic Investment Conference, Raoul has agreed to let me utilize him a great deal more than in the past. Not only is he presenting with Grant Williams (a killer duo last year) but he will also be moderating and participating in a few panels. When you come to the conference (surely you are coming to the conference), you want to make sure to spend some time getting to know Raoul.

And with that, I’m going to dive back into my own research and see if I can come up with a few more ideas worthy of your attention. Maybe not mind-blowing, but hopefully worth your time. Have a great rest of the week, and we’ll touch base again this weekend.

Your just trying to keep up analyst,

John Mauldin, Editor
Outside the Box

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By Raoul Pal
March 2017

I’m going to blow your mind with this following article. My mind is still reeling from my discovery and from writing this piece.

Let me enlighten you...

Companies that create massively outsized technological breakthroughs tend to capture the investing population’s attention and thus their share prices trade at huge multiples, as future growth and future revenues are extrapolated into the future.

From time to time, entire countries re-model their economies and shift their growth trajectory. The most recent example was the liberalisation of China’s economy and massive spending on infrastructure, which together created an incredibly powerful force for growth over the last two decades.

But it is very rare indeed that a country develops an outsized technological infrastructure breakthrough that leaves the rest of the world far behind.

But exactly this has just happened in India... and no one noticed.

India has, without question, made the largest technological breakthrough of any nation in living memory.

Its technological advancement has even left Silicon Valley standing. India has built the world’s first national digital infrastructure, leaping at least two generations of financial technologies and has built something as important as the railroad was to the UK or the interstate highways were to the US.

India is now the most attractive major investment opportunity in the world.

It’s all about something called Aadhaar and a breathtakingly ambitious plan with flawless execution.

What just blows my mind is how few people have even noticed it. To be honest, writing the article last month was the first time I learned about any of the developments. I think this is the biggest emerging market macro story in the world.

Phase 1 – The Aadhaar Act

India, pre-2009, had a massive problem for a developing economy: nearly half of its people did not have any form of identification. If you were born outside of a hospital or without any government services, which is common in India, you don’t get a birth certificate. Without a birth certificate, you can’t get the basic infrastructure of modern life: a bank account, driving license, insurance or a loan. You operate outside the official sector and the opportunities available to others are not available to you. It almost guarantees a perpetuation of poverty and it also guarantees a low tax take for India, thus it holds Indian growth back too.

Normally, a country such as India would solve this problem by making a large push to register more births or send bureaucrats into villages to issues official papers (and sadly accept bribes in return). It would have been costly, inefficient and messy. It probably would have only partially worked.

But in 2009, India did something that no one else in the world at the time had done before; they launched a project called Aadhaar which was a technological solution to the problem, creating a biometric database based on a 12-digit digital identity, authenticated by finger prints and retina scans.

Aadhaar became the largest and most successful IT project ever undertaken in the world and, as of 2016, 1.1 billion people (95% of the population) now has a digital proof of identity. To understand the scale of what India has achieved with Aadhaar you have to understand that India accounts for 17.2% of the entire world’s population!

But this biometric database was just the first phase...

Phase 2 – Banking Adoption

Once huge swathes of the population began to register on the official system, the next phase was to get them into the banking system. The Government allowed the creation of eleven Payment Banks, which can hold money but don’t do any lending. To motivate people to open accounts, it offered free life insurance with them and linked bank accounts to social welfare benefits. Within three years more than 270 million bank accounts were opened and $10bn in deposits flooded in.

People who registered under the Aadhaar Act could open a bank account just with their Aadhaar number.

Phase 3 – Building Out a Mobile Infrastructure

The Aadhaar card holds another important benefit – people can use it to instantly open a mobile phone account. I covered this in detail last month but the key takeaway is that mobile phone penetration exploded after Aadhaar and went from 40% of the population to 79% within a few years...

The next phase in the mobile phone story will be the rapid rise in smart phones, which will revolutionise everything. Currently only 28% of the population has a smart phone but growth rates are close to 70% per year.

In July 2016, the Unique Identification Authority of India (UIDAI), which administers Aadhaar, called a meeting with executives from Google, Microsoft, Samsung and Indian smartphone maker Micromax amongst others, to talk about developing Aadhaar compliant devices.

Qualcomm is working closely with government authorities to get more Aadhaar-enabled devices onto the market and working with customers – including the biggest Android manufacturers – to integrate required features, such as secure cameras and iris authentication partners.

Tim Cook, CEO of Apple, recently singled out India as a top priority for Apple.

Microsoft has also just launched a lite version of Skype designed to work on an unstable 2G connection and is integrated with the Aadhaar database, so video calling can be used for authenticated calls.

This rise in smart, Aadhaar compliant mobile phone penetration set the stage for the really clever stuff...

Phase 4 – UPI – A New Transaction System

But that is not all. In December 30th 2016, Indian launched BHIM (Bharat Interface for Money) which is a digital payments platform using UPI (Unified Payments Interface). This is another giant leap that allows non-UPI linked bank accounts into the payments system. Now payments can be made from UPI accounts to non-UPI accounts and can use QR codes for instant payments and also allows users to check bank balances.

While the world is digesting all of this, assuming that it is going to lead to an explosion in mobile phone eWallets (which is happening already), the next step is materializing. This is where the really big breakthrough lies...

Payments can now be made without using mobile phones, just using fingerprints and an Aadhaar number.

XXXXXXX hell. That is the biggest change to any financial system in history.

What is even more remarkable is that this system works on a 2G network so it reaches even the most remote parts of India!! It will revolutionise the agricultural economy, which employs 60% of the workforce and contributes 17% of GDP. Farmers will now have access to bank accounts and credit, along with crop insurance.

But again, that is not all... India has gone one step further...

Phase 5 – India Stack – A Digital Life

In 2016, India introduced another innovation called India Stack. This is a series of secured and connected systems that allows people to store and share personal data such as addresses, bank statements, medical records, employment records and tax filings and it enables the digital signing of documents. This is all accessed, and can be shared, via Aadhaar biometric authentication.

Essentially, it is a secure Dropbox for your entire official life and creates what is known as eKYC: Electronic Know Your Customer.    

Using India Stack APIs, all that is required is a fingerprint or retina scan to open a bank account, mobile phone account, brokerage account, buy a mutual fund or share medical records at any hospital or clinic in India. It also creates the opportunity instant loans and brings insurance to the masses, particularly life insurance. All of this data can also in turn be stored on India Stack to give, for example, proof of utility bill payment or life insurance coverage.

What is India Stack exactly?

India Stack is the framework that will make the new digital economy work seamlessly.

It’s a set of APIs that allows governments, businesses, startups and developers to utilise a unique digital infrastructure to solve India’s hard problems towards presence-less, paperless and cashless service delivery.

  • Presence-less: Retina scan and finger prints will be used to participate in any service from anywhere in the country.
  • Cashless: A single interface to all the country’s bank accounts and wallets.
  • Paperless: Digital records are available in the cloud, eliminating the need for massive amount of paper collection and storage.
  • Consent layer: Give secured access on demand to documents.

India Stack provides the ability to operate in real time, transactions such as lending, bank or mobile account opening that usually can take few days to complete are now instant.

As you can see, Smart phones will act as key to access the kingdom.

This is fast, secure and reliable; this is the future...

This revolutionary digital infrastructure will soon be able to process billions more transactions than bitcoin ever has. It may well be a bitcoin killer or at best provide the framework for how blockchain technology could be applied in the real world. It is too early to tell whether other countries or the private sector adopts blockchain versions of this infrastructure or abandons it altogether and follows India’s centralised version.

India Stack is the largest open API in the world and will allow for massive fintech opportunities to be built around it. India is already the third largest fintech centre but it will jump into first place in a few years. India is already organizing hackathons to develop applications for the APIs.

It has left Silicon Valley in the dust.

Phase 6 – A Cash Ban

The final stroke of genius was the cash ban, which I have also discussed at length in the past. The cash ban is the final part of the story. It simply forces everyone into the new digital economy and has the hugely beneficial side-effect of reducing everyday corruption, recapitalising the banking sector and increasing government tax take, thus allowing India to rebuild its crumbling infrastructure...

India was a cash society but once the dust settles, cash will account for less than 40% of total transactions in the next five years. It may eliminate cash altogether in the next ten years.

The cash ban digitizes India. No other economy in the world is even close to this.

Phase 7 – The Investment Opportunity

Everyone thinks they know about the Indian economy – crappy infrastructure, corruption, bureaucracy and antiquated institutions but with a massively growing middle class. Well, that is the narrative and has been for the last 15 years.

But that phase is over and no one noticed. So few people in the investment community or even Silicon Valley are even vaguely aware of what has happened in India and that has created an enormous investment opportunity.

The future for India is massive technological advancement, a higher trend rate of GDP and more tax revenues. Tax revenues will fund infrastructure – ports, roads, rail and healthcare. Technology will increase agricultural productivity, online services and manufacturing productivity.

Telecom, banking, insurance and online retailing will boom, as will the tech sector.

Nothing in India will be the same again.

FDI is already exploding and will rise massively in the years ahead as technology giants and others pour into India to take advantage of the opportunity...

I am long the telco sector (Bharti)...

And I am long the Nifty Banks Index...

I think India is going to offer an entire world of opportunity going forwards.

If I can sum up, it’s in this one chart: the SENSEX in US Dollars. It looks explosive for the next 10 years...

Incredible India indeed.

***Hot off the press***

I decided to test the waters on Twitter on Sunday and Monday to find out how many non-Indians were aware of India Stack/Aadhaar. I have 24,000 followers on Twitter, many of which are you guys, and hosts of others heavily engaged in financial markets i.e. it’s a decent data sample.

In the 12 hours since the survey began, around 900 people have responded. It appears that 90% of the investment world knows absolutely nothing about the biggest IT project ever accomplished and have never even heard of it.

Now, that is an informational edge.



Raoul Pal has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 26 years of experience in advising hedge funds and managing a global macro hedge fund.

Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years.

Raoul Pal retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands.

He is also the founder of Real Vision Television, the world’s first on-demand TV channel for finance: www.realvisiontv.com

Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world.

Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences.

Other stop-off points on the way were NatWest Markets and HSBC, although he began his career by training traders in technical analysis.

Should you wish to receive information about membership, please email us at info@globalmacroinvestor.com. The number of members is STRICTLY limited; only a few spaces are available each year as the membership is essentially full. A waiting list will apply if there are no spaces currently available.

Raoul Pal, Global Macro Investor, Cayman Islands

March 2017

Discuss This


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April 6, 2017, 8:36 a.m.

was an interesting article, for sure. I knew about the Aardhar card, and of course the pull back of the cash economy.  But I didn’t know about the India Stacks.  If that is truly the case, then it is a game changer for Indians. But, of course, as long as the electricity and infrastructure becomes more stable and literacy rates continue to rise.  The Aardhar card is very similar to the Social Security card, but much more (as described in the article) but full implementation has not taken place just yet.

One thing is true.  All these changes are disrupters.  They have the power to completely gut the ‘old hard cash’ economy and therefore make room for a new economy, by default.  He’s not wrong.  There is a chance for huge investment - for the long term - not the short term. The commitment of the public, private sector and government will need to remain steady. With over 1.6 BN people, that is what I caution:

(1) They’ll need to implement all these major changes while Modi is still in office. He is the engine behind the operation.  There is strong opposition on the ground. 

(2) Centuries of corruption will not die so quickly.  It will take generations, and I have heard people say exactly that, “finally, we are starting something now that the grandkids can take forward.” Therefore, the investment is generational.

(3) Is it Hack-proof?  How safe is this system?  They are now experiencing electronic identity theft in higher numbers in India.  Do we know that this one process flow can withstand an attack?  One major incident could cripple the entire system.  Investing in identity protection is needed.

When I go to the banks now, each visit is at least one hour which entails a simple KYC and withdrawal of Rupees. Since I don’t have an Aardhar card, the process is manual and tedious.  One of the banks still has a ledger room with account history written in volumes in super large books.  My banker goes through the pages to find the history on my account, and then staples in my newest photograph over the old ones.  Nothing is automated. But, they know who I am and how much older I look now than the last time I visited.

Historically, one of the reason why nothing is automated is because there are so many people.  It is cheaper to hire someone than install a new machine.  What are they going to do with all these lesser skilled (in modern technology) employees when the machines and robots arrive?  Have they started an adult education curriculum?  I haven’t heard about it.  That is a short term investment opportunity. So there is a lot to be seen.  Since no one knows the full plan, it has been done in absolute secrecy, I’m not sure what comes next.  I hope for the best.

I think it is funny that he lives in the Cayman Islands.


April 2, 2017, 3:06 a.m.

Mr Raoul Pal a guy that lives in the “the ultimate libertarian paradise”, a no government island of 100 residents, have the insolence to touting forcibly and adjectivally a dystopian system of total control that fragilize a billion people, making them obviously vulnerable to an eventual inescapable totalitarian subordination.  At first I thought of a cognitive parallax but on reflection discovered only the old moral eclipse.

Then on Mr Raoul Pal resume in the end we learn that he co-managed Goldman Sachs SALES business in Equities and Equity Derivatives in Europe. Surprise! He is marketing guy! Furthermore he began his career by training traders in Technical Analysis, the good old marketing tool trick of the financial industry sell side. He is really a marketing guy!

A disgression: Technical analysis a tool that exemplify a whole treatise on fallacies. With its functions of past prices indicators (which make those indicators obviously correlated with the trajectory of prices) . The babble goes as follows: After the fact when one find prices of an asset moved in a direction, and as a matter of fact broke indicators levels (that in technical analysis parlance is named resistance or support levels) since those are mere a function of past prices. The analyst comes an says: “You see, when the price of asset x broke the indicators resistance they go away” Then of course they shroud everything in probability theory terms to camouflage the fallacies and complicate the factual verification by normal people which are aimed by that marketing tool.

In resume:


The movement of prices deterministically -> draw the graphics of prices.

The Technical analysis guys invert that logical simple fact adding a probabilistic twist and pretends that:

The graphic probabilistic -> draws the future moves of prices.

Ironically and telling the system of prices and arbitrage transaction in a free market economy, certainly proudly seem by Technical analysis world over as a revealer of the true value of services and things according to theirs relative scarcity, assign to Technical analysis a very near zero price. You can read everything about even the most arcane theory of Technical analysis free in the internet or in very cheap books. So either money has no scarcity at all or Technical analysis is completely ineffective. Take your pick.

Anyone who claim the effectiveness of Technical analysis, even if appealing to a supposed self profetizing or reflective effect,  to attain a recurrent financial gains is intellectual immature or is trying to sell some financial service, in fact trying to sell a dream of financial independence. A dream the gullible anxiously and blindly embrace.

Another thing that smells fishy is the whole marketing blatter about the Mr Rauol Pal’s newsletter being strictly limited.” only a few spaces are available” blah blah blah. Seemingly expecting the public to not notice the inexistence of a natural hard limit in digital distribution of any publication, this is not a seat in a theater, and that that stricture is being announced and published in a very popular, and mostly middle class readership, John Mauldin’s website.

Talk about another good old trick: artificial scarcity. My well worn copy of the classic Robert B. Cialdini’s “INFLUENCE – The Psychology Of Persuasion” have probably more to tell about this newsletter than any insight in investing ever gained by subscribing and reading it. 



April 1, 2017, 12:13 p.m.

Comment #3 along same lines as prior ones below. Why is it always assumed that technology advancement is a good thing and that the centralization of technology (with its inherent opportunity to control/abuse) leads to better life for all? A cursory study of the history of mankind over 1000’s of years quickly shows one of control by a limited few (elitists, monarchs, dictators, etc.) over the many, for the almost exclusive benefit of the few. It has only been in the last ~250 years with the advent of concepts of liberty, personal freedom and private property rights that any significant portion of the human race has lived outside this historic model. What defines and keeps us free? Personal property rights and personal freedom to make choices. How is it that technology advances are hailed yet never a discussion of how has the nature of man changed to adequately and ethically manage/use/control these new technologies?

In Phase 6, the author calls a cash ban a “final stroke of genius”, without ever recognizing what the implications are for a cashless society - complete lack of personal property rights and loss of personal freedom/choice. Without a physical currency, one is left at the mercy of those who control this digital world. No cash, no choice, no freedom. Governments are then free to regulate, confiscate whatever they deem right. The individual has NO recourse in such a cashless world. All the arguments used in favor of cashless societies (crime deterrence, more govt income, etc) are all a hollow shell for the real objective. CONTROL. The Enlightenment and its spread of the concepts of liberty and personal freedom have made control by the few difficult to reassert.  The advent of these digital, centralizing technologies are a means to re-exert the historical model of human societies. If someone/some governing authority can control your money, they control your means of survival and hence they control you!!

Be careful what you ask for Raoul, you might just get it!


April 1, 2017, 11:31 a.m.

A poor but honest American, living in India, responds to the article:

Oddly, my Aadhar card says “nationality: Indian” on it. I’ll try to get it corrected. Odd especially since I had to present the US passport to get the card.

I have seen these changes going on, but didn’t see it from the investor’s perspective. A child can’t get admitted to school without an Aadhar card. Truly they have done an amazing thing. But about the banking part, I don’t see how India will get off cash. Stores have a sign in the front door “Paytm” which means they can accept that form of cashless payment. But I don’t see a lot of people using it. I wonder whether anyone will take their cell and no cash to a vegetable/fruit bazaar. And that’s probably the single biggest expense (food, including wheat and jowhar) for every poor person. The cashless transition he sees is one for the growing middle class I presume and not really for the poor.

Meanwhile the new govt has a policy that’s pushing foreigners out of the system: maximum deposits per week into an Indian account is now limited to Rs 5000. Since we spend more than that, we can no longer use an Indian bank account and ATM card to function in India. We’re all cash except at a hotel or at [a Pune food store for worldly people], which can accept our USA debit card.


March 30, 2017, 11:48 p.m.

Jim already touched on it, but I’ll add this.  Let’s put all our personal info into the cloud (medical, financial, whatever), so government, in cahoots with any corporation that wants access to it, can see it.  Anyone NOT see a problem with that?

Jim Coulson

March 30, 2017, 9:25 a.m.

Another amazing job of research and presentation.  Thanks to Raul and John.  Would be interesting to see how to best capitalize on this trend.

One thought that is also “outside the box.”  India has a history of corruption.  Unfortunately, as we are seeing, the US government is sliding into an “anything goes” attitude as long as it hurts the other party.  Of course, they won’t call that corruption, but it is…once you make releasing intelligence purely to hurt another person, or start manipulating charities for personal gain, the only word for it is corrupt.

Now, throw in a cashless society.  Now that government controls 100% of a person’s future.  Granted, a barter system may always undercut that somewhat, but by-in-large you will be held hostage by your government.  Want to move outside the country?  What if the government won’t allow you to take your digital currency?  Want to move your cash offshore…oh, wait, we’re all ready there where they require a foreign bank to report any US citizen’s account.  Want to renounce your citizenship because of high taxes?  Well, a government that controls the digital cash can just nationalize your funds.  International banking crisis?  Gee, how about a government “bail in” like Cyprus?  Congratulations, you can’t access your savings, but feel good that it is going to a good cause.  (“Cause we said so). 

So, with any good comes bad.  A move to a cashless society needs important safeguards moved into place to protect a free and open society.

As John pointed out so well in his books, a day of reckoning is coming for the U.S.  Our economic excesses are going to catch up with us as debts mount.  A cashless society merely allows the politicians more access to immediate cash, and I fear the lemmings could not resist the urge to use it, rather than solve the systemic problems.  At least so far they haven’t addressed them, but kicked the can down the road.

Good article and thanks.